We’ve updated this article to cover the best low cost index trackers now on the market. It replaces the previous version. Note: We will not include exclusive Super Clean funds where the total cost of investing works out to be more expensive than commonly available options.
Low costs – that’s the name of the game for passive investors. Performance is unpredictable and elusive, but costs are nailed on. They nibble away at your returns like a satanic mouse – harmless enough at first, until you realise all your cheese has gone.
As Morningstar puts it:
If there’s anything in the whole world of mutual funds that you can take to the bank, it’s that expense ratios help you make a better decision.
That’s why I try to leave no penny un-pinched when searching for cheap funds.
I presented my top, low cost picks in the lazy portfolio post. But it’s nice to have a choice, especially when Britain’s cheapest index funds come with a catch.
So, for your ascetic delight and entertainment, I now bring you: Britain’s cheapest index trackers and their next best alternatives.
As an avowed passive investor, I’m concentrating purely on index funds and Exchange Traded Funds (ETFs). That’s because they are the simplest cut-price vehicles available.
I’m also sticking to the broad market categories recommended in the lazy portfolios. They offer ample diversification at a low cost. I’m not into kinky stuff like short Brazilians.
My picks are based purely on price as measured by the Ongoing Charge Figure (OCF), and any other upfront fund fees that may apply. There are other factors to consider when buying a fund (like tracking error, liquidity, and size) so it’s always worth reading any documentation to make sure it fits your bill.
Identifying tickers or ISIN codes are given in brackets. If there are any other wrinkles worth mentioning, I’ll throw them in along the way.
Finally, if you’re looking for the cheapest place to buy and hold these funds then take a butcher’s at our online broker comparison table.
The UK’s best low cost index trackers
Right, let’s grab some bargains!
Note: Anything not labelled ETF or ETC will be an index fund. Codes are given for the accumulation funds; income fund equivalents are generally also available.
Domestic equity
Cheapest
db X-trackers FTSE 100 ETF (XDUK)1 OCF 0.9%
Next best
Vanguard FTSE 100 ETF (VUKE) OCF 0.1%
Royal London FTSE 350 Tracker Fund (GB00B523MH29) OCF 0.12%, initial fee 0.5%
Royal London FTSE All Share Tracker Fund (GB00B533V415) OCF 0.15%
Vanguard FTSE UK Equity Index (VVUKEQ) OCF 0.15%, initial fee 0.4%
Domestic small cap equity
There are no good tracker options in this asset class. Each of the following is flawed to some degree (with Aberforth it’s because it’s not a tracker at all!)
iShares MSCI UK Small Cap (CUKS) OCF 0.58%
Aberforth Smaller Companies Trust (ASL) OCF 0.79%
Domestic value equity
Again, UK tracker options are only an approximation of this asset class:
Cheapest
Vanguard FTSE UK Equity Income Index (VVUEIN) OCF 0.25%, initial fee 0.5%
Next best
Amundi ETF FTSE UK Dividend Plus ETF (AUKD) OCF 0.3%2
SPDR S&P UK Dividend Aristocrats ETF (UKDV) OCF 0.3%
PowerShares FTSE RAFI UK 100 ETF (PSRU) OCF 0.5%
Note: The first three are high-yielding funds, not true value funds. There aren’t any UK value trackers available on the open market. A high-yielding fund is a distant cousin of value and not always a pretty one at that. Value funds are available in the UK through Dimensional Fund Advisors, but only via an associated IFA who will charge you fees. The PowerShares ETF is a so-called Smart Beta tracker that tilts towards value. It would take the place of a standard UK tracker in your portfolio because it invests in core, large cap UK equities, albeit erring in favour of those with value characteristics.
World equity
Cheapest
Fidelity Index World Fund (GB00B7LWFW05) OCF 0.15%
Next best
Vanguard FTSE All-World ETF (VWRL) OCF 0.25%
L&G Global 100 Index Trust I (GB00B0CNH056) OCF 0.26%
Vanguard LifeStrategy 100% Equity OCF (GB00B41XG308) OCF 0.29%, initial fee 0.16%
The Vanguard trackers contain an emerging market component. The rest cover the developed world only.
World value equity
Cheapest
Vanguard FTSE All World High Dividend Yield ETF (VHYL) OCF 0.29%
Next best
SPDR S&P Global Dividend Aristocrats ETF (GBDV) OCF 0.45%
PowerShares FTSE RAFI Developed 1000 ETF (PSRD) OCF 0.5%
PowerShares FTSE RAFI All-World 3000 ETF (PSRW) OCF 0.5%
Note: Again the first two ETFs are high yielding dividend trackers rather than straight value products. The PowerShares ETFs tilt towards value (and PSRW features an emerging markets allocation). Dimensional Fund Advisors offers value orientated funds, if you can get them.
World small cap equity
Cheapest
Vanguard Global Small-Cap Index Fund (VIGSCA) OCF 0.4%
Next best
SPDR MSCI World Small Cap ETF (WOSC) OCF 0.45%
International ex-UK equity
Cheapest
Aviva Investors International Index Tracking SC2 (GB00B2NRNX53) OCF 0.27%
Next best
Vanguard FTSE Dev World ex-UK Equity Index (VVDVWE) OCF 0.3%
L&G International Index Trust I (GB00B2Q6HW61) OCF 0.31%
db x-trackers FTSE All-World ex-UK (XWXU) OCF 0.4%
You can also pick ‘n’ mix using individual US, Europe ex-UK, Japan, and Pacific ex-Japan trackers.
Emerging markets equity
Cheapest
Vanguard FTSE Emerging Markets ETF (VFEM) OCF 0.29%
Next best
BlackRock Emerging Markets Equity Tracker Fund D (GB00B84DY642) OCF 0.29%
Vanguard Emerging Markets Index (VIEMKT) OCF 0.40%
SPDR MSCI Emerging Markets Small Cap ETF (EMSM) OCF 0.65%
iShares Dow Jones Emerging Markets Select Dividend ETF (SEDY) OCF 0.65%
Low volatility
Cheapest
iShares MSCI World Minimum Volatility ETF (MVOL) OCF 0.3%
Next best
iShares MSCI Emerging Markets Minimum Volatility (EMV) OCF 0.4%
Ossiam ETF FTSE 100 Minimum Variance (LU0705291739) OCF 0.45%
Property – UK
Cheapest
iShares FTSE EPRA/NAREIT UK Property ETF (IUKP) OCF 0.4%
Next best
No index tracker alternative
Property – global
Cheapest
BlackRock Global Property Securities Equity Tracker D (GB00B5BFJG71) OCF 0.25%
Next best
HSBC FTSE EPRA/NAREIT Developed ETF (HPRD) OCF 0.4%
SPDR Dow Jones Global Real Estate ETF (GBRE) OCF 0.4%
Includes emerging markets exposure.
All-commodities
Cheapest
Lyxor ETF Commodities Thomson Reuters/Jefferies CRB TR (CRBL) OCF 0.35%
Next best
Source LGIM Commodity Composite Source ETF (LGCF) OCF 0.4%
UBS-ETF CMCI Composite SF (UC15) OCF 0.45%
Gold
Cheapest
iShares Physical Gold ETC (SGLN) OCF 0.25%
Next best
Source Physical Gold ETC (SGLD) OCF 0.29%
Both trackers are Exchange Traded Commodities (ETCs) backed by physical gold.
UK Government bonds – mixed duration
Cheapest
Vanguard UK Government Bond ETF (VGOV) OCF 0.12%
Next best
SPDR Barclays Capital UK Gilt ETF (IE00B3W74078) OCF 0.15%
Vanguard UK Gov Bond Index (VIUKGO) OCF 0.15%
BlackRock UK Gilts All Stocks Tracker D (GB00B83HGR24) OCF 0.16%
UK Government bonds – long
Cheapest
SPDR Barclays Capital 15+ Year Gilt ETF (IE00B6YX5L24) OCF 0.15%
Next best
Vanguard UK Long-Duration Gilt Index fund (VVUKLD) OCF 0.15%, initial fee 0.1%
UK Government bonds – short
Cheapest
SPDR Barclays Capital 1-5 Year Gilt ETF (IE00B6YX5K17) OCF 0.15%
Next best
iShares FTSE Gilts 0-5 ETF (IGLS) OCF 0.2%
db x-trackers iBoxx £ Gilts 1-5 ETF (LU0429458978) OCF 0.2%
UK Government bonds – index-linked
Cheapest
Vanguard UK Inflation Linked Gilt Index fund (GB00B45Q9038) OCF 0.15%, initial fee 0.1%
Next best
BlackRock Index Linked Gilt Tracker D (GB00B83RVT96) OCF 0.16%
db x-trackers iBoxx UK Gilt Inflation Linked (LU0321464223) OCF 0.2%
International government bonds
Cheapest
BlackRock Overseas Government Bond Tracker D (GB00B849C803) OCF 0.17%
Next best
iShares Global Government Bond ETF (IGLO) OCF 0.2%
iShares Global AAA-AA Government Bond ETF (SAAA) OCF 0.2%
db X-trackers Global Sovereign ETF (XG7S) OCF 0.25%
Hedged back to Sterling so currency risk is not an issue.
International bonds (government and corporate)
Cheapest
Vanguard Global Bond Index (IE00B50W2R13) OCF 0.2% , initial fee 0.2%
Hedged back to Sterling so currency risk is not an issue.
Next best
Vanguard Global Short Term Bond Index (IE00BH65QG55) OCF 0.2%, initial fee 0.2%
Hedged back to Sterling so currency risk is not an issue.
International inflation-linked bonds
Cheapest
db X-trackers iBoxx Global Inflation Linked ETF GBP (XGIG) OCF 0.25%
Hedged back to Sterling so currency risk is not an issue.
Next best
iShares Barclays Capital Global Inflation-Linked Bond ETF (IGIL) OCF 0.25
L&G Global Inflation Linked Bond Index I (GB00BBHXNN27) OCF 0.25
Corporate bonds
Cheapest
BlackRock Corporate Bond Tracker D (GB00B84DSW83) OCF 0.17%
Next best
BlackRock Overseas Corporate Bond Tracker D (GB00B58YKH53) OCF 0.17%
SPDR Barclays Capital Sterling Aggregate Bond ETF (IE00B3T8LK23) OCF 0.2%
A UK total bond market ETF including gilts, corporate bonds and asset-backed debt.
Vanguard U.K. Short-Term Investment Grade Bond Index (IE00B9M1BB17) OCF 0.2%, initial fee 0.5%
Concluding thoughts on low cost trackers
If you’re new to passive investing then it might seem like you now have a lot of decisions to make after reading that lot.
This piece on designing your own asset allocation will help you construct your own portfolio. If you want a quick short-cut then you can do a lot worse than picking a fund-of-funds instant portfolio solution.
We update this post periodically so please bear in mind the quoted OCFs may date, but this list should still prove an excellent starting point for your research.
And if anyone comes across any better index tracker options I’d love to hear about them.
Take it steady,
The Accumulator
Note: Some comments below may refer to an older collection of low cost index trackers. Scroll down for the latest thoughts.
Don’t get this confused with the identically named version that’s three times as expensive. You want ticker XDUK, not XUKS.
You may wish to think twice about Amundi ETFs for three reasons. 1. They are synthetic. 2. They are domiciled in France and therefore subject to withholding tax. 3. They are denominated in Euros and therefore subject to currency risk.